Mike Berman's Random Thoughts and Opinions

Thursday, December 30, 2010

Time Savers

1. When I sign my name, I don't dot the "i" anymore. I estimate that this saves me about 1 second per signature, which adds up to about 6 minutes per year.

2. When I write "ok" in a chat, now I just abbreviate it as "k". I estimate that this saves me about 0.1 seconds per occurrence, which adds up to about 4 minutes per year. My friends are the true losers in this transaction, since it takes them about 2 seconds to stop and remember that "k" means "ok".

Unfortunately, this post took me about 5 minutes to write, so it will take me about 6 months to catch up for the lost time.

Tuesday, December 21, 2010

Deal or No Deal

Have you ever noticed a pattern on the game show Deal or No Deal? The first offer from the banker is pretty high, like $100K. The player turns it down. The deals get successively smaller, the player keeps turning them down, and the player ends up taking a deal for about $8K. He slouches off the stage as the host says "well, at least you got something".

It makes sense why this happens. The expected value for the player when the game starts is $111K. But the great majority of the cases are worth less than that. So the median value is much less than the mean. Unless the player really wants the million dollar case and nothing else, his best strategy is to quit the game as soon as possible.

To see this, look at this example. Suppose the game had 1,000 cases. 999 of them have $1 and one of them has $1 billion. The expected winnings at the start of the game are $1 million. But if the player keeps playing, he ultimately has a 99.9% chance of winning only $1! Most people would agree that he should open a few cases, and then take the initial offer of about $1 million.

The real game is essentially a similar situation - just the numbers are jumbled up a bit to confuse things.

So why does the player usually not do the above strategy?

1. The "House Money" effect - Studies have shown that if people are playing with money that is not theirs, they play more aggressively.

2. The "Win Back Your Losses" effect - After the million dollar case is lost (which will happen 95% time, if you play long enough) the player wants to win back what they lost, which means hoping against hope that they open all of the cases except the highest one that is left.

3. Bad Advice - The player is constantly urged by their friends and the audience to turn down almost any deal.